The EUR/USD currency pair found a tentative floor in the lower 1.0700s, staging a modest recovery following the release of favorable Eurozone manufacturing data. Manufacturing figures are a crucial piece of data for the European currency since they are viewed as a proxy indicator of the growth potential of the European economy. The final estimate for Manufacturing PMI for March surpassed economists' expectations, providing a glimmer of optimism for investors.

Although German inflation figures fell short of expectations, with the HICP slowing to 2.2% year-on-year in March from 2.4% in February, the impact on the EUR/USD was muted. This underperformance aligns with projections of an imminent interest-rate cut by the European Central Bank in June, yet it has failed to significantly sway market sentiment.

Eurozone HCOB Manufacturing PMI data offered a more optimistic narrative, showing a rise to 46.1 in the final estimate for March, exceeding the flash estimate of 45.7. However, despite this improvement, the index remains below the pivotal 50-point mark, indicating continued contraction in the manufacturing sector. This stands in contrast to the US Manufacturing PMIs, which signaled expansion for the first time since 2022, further underscoring the fact that growth trajectories in the US and EU diverge in the near term.

In the short term, the technical outlook for EUR/USD suggests a significant development as the price recently broke below a crucial medium-term demand line and rebounded from the 1.0720 mark, forming what appears to be a triple-bottom pattern. However, the ease with which bulls relinquished control of this support level without mounting a substantial defense may embolden bearish sentiment, potentially paving the way for increased selling pressure in the immediate future. As a result, there is a likelihood of the price experiencing a downward slide towards the next critical support level at 1.0650, which serves as a pivotal stronghold for bullish traders.

Over the Easter weekend, the USD gained strength, fueled by robust US macroeconomic data and hawkish remarks from Federal Reserve Chairman Jerome Powell. The likelihood of a US Federal Reserve interest rate cut by June diminished to close to 50%, reinforcing the attractiveness of higher USD interest rates to investors.

Conversely, the Euro faced headwinds as ECB officials voiced support for a rate cut ahead of the Fed. ECB Governing Council member Robert Holzmann indicated that the timing of such a move would hinge on wage and price developments by June, highlighting the cautious stance of Eurozone policymakers amidst sluggish growth and subdued inflation.

Meanwhile, the Pound Sterling found support near a six-week low against the USD, buoyed by upbeat UK Manufacturing PMI data. The return to expansion territory, with a PMI reading of 50.3, provided a much-needed boost amid lingering uncertainties surrounding the BoE’s rate-cut outlook.

The technical outlook for GBP/USD continues to lean towards the bearish side, with the potential for further downside movement. This sentiment is grounded in the observation that a more favorable zone for a potential reversal in price lies below current levels. Specifically, attention is drawn to a significant round horizontal support level at 1.25, which presents a plausible area where the price may find renewed buying interest and attempt to reverse its downward trajectory:

UK retail inflation data in March further underscored the cautious economic outlook. The report from the BRC showed that both food and non-food prices eased, reflecting softer consumer demand and highlighting the delicate balancing act facing policymakers in stimulating economic growth while managing inflationary pressures.